The Worst That Can Happen In A Bankruptcy

Recently, a debtor in my district was convicted of 28 counts of bankruptcy fraud, money laundering and other sundry felonies. He is facing 10 to 25 years in prison! All this for lying on his bankruptcy papers and to the trustee.

This debtor hired an excellent and very ethical attorney. He just didn’t tell the attorney the whole story; hiding assets, transferring property on the eve of filing, and forging documents to make it all look legitimate.

Unfortunately for the debtor, his ex-wife got wind of the fact that he had filed bankruptcy. She asked the bankruptcy trustee if the debtor had mentioned a couple of assets. Seems he had forgotten about them. That led to the trustee’s investigation and a lot more questioning. Finally the US Attorney’s office took over, finished the investigation and filed a criminal action.

Had the debtor been completely honest from the beginning, no doubt the attorney he hired would have found a way to get him the relief from creditors he needed. Perhaps with something other than a Chapter 7 bankruptcy.

The moral of the story is to be completely honest to your lawyer and to the bankruptcy court. (And, beware of ex-spouses who know where the skeletons are buried!)

Douglas Jacobs is a California bankruptcy attorney and partner in the Chico law firm of Jacobs, Anderson, Potter & Chaplin. Since 1988, Mr. Jacobs has taught Constitutional law and Debtor-Creditor/Bankruptcy law at the Cal Northern School of Law. He has served as Dean of Students since 1994. He is a frequent lecturer on the subject of consumer bankruptcy law, and has spoken at both state and national levels.

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